History The Great Depression Questions
The collapse of the stock market during the Great Depression was primarily caused by a combination of factors. One major cause was the speculative bubble that had formed in the stock market, where investors were buying stocks on margin (using borrowed money) and driving up prices to unsustainable levels. Additionally, there was an oversupply of goods and a decline in consumer spending, leading to a decrease in corporate profits. This, in turn, caused investors to lose confidence in the market and sell their stocks, triggering a downward spiral.
The effects of the stock market collapse were devastating. The crash led to a widespread panic and a significant loss of wealth for investors. Many banks and financial institutions failed as a result of their investments in the stock market. This led to a severe contraction of credit, making it difficult for businesses and individuals to borrow money. As a result, businesses closed, unemployment soared, and millions of people lost their jobs. The collapse of the stock market also had a global impact, as it contributed to a worldwide economic downturn and a decline in international trade. Overall, the collapse of the stock market during the Great Depression worsened the economic crisis and deepened the hardships faced by individuals and societies.